Fallon Company uses flexible budgets to control its selling expenses. Monthly sa

Question

Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $167,400 to $201,300. Variable costs and their percentage relationship to sales are sales commissions 8%, advertising 4%, traveling 4%, and delivery 1%. Fixed selling expenses will consist of sales salaries $34,900, depreciation on delivery equipment $7,400, and insurance on delivery equipment $1,500. Prepare a monthly flexible budget for each $11,300 increment of sales within the relevant range for the year ending December 31, 2017

Explanation / Answer

SOLUTION

Fallon Company

Monthly Selling Expense Flexible Budget

For the Year 2017

Amount ($) Amount ($) Amount ($) Amount ($) Activity Level (Sales) 167,400 178,700 190,000 201,300 Variable expenses:   Sales commissions (8%) 13,392 14,296 15,200 16,104   Advertising (4%) 6,696 7,148 7,600 8,052   Traveling (4%) 6,696 7,148 7,600 8,052   Delivery (1%) 1,674 1,787 1,900 2,013 Total Variable Exp (17%) (A) 28,458 30,379 32,300 34,221 Fixed expenses:   Sales salaries 34,900 34,900 34,900 34,900   Depreciation 7,400 7,400 7,400 7,400   Insurance 1,500 1,500 1,500 1,500 Total Fixed Expenses (B) 43,800 43,800 43,800 43,800 Total Expenses (A+B) 72,258 74,179 76,100 78,021

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